Q3 2021 Lument Finance Trust Inc Earnings Call
Good morning, and thank you for joining the Lumen Finance Trust third quarter 2021 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two today.
Today's call is being recorded and will be made available via webcast on the company's website.
I'd now like to turn the call over to Charles study with Investor Relations at limit investment management. Please go ahead.
Thank you Gary and good morning, everyone.
Thank you for joining our call to discuss alumina Finance Trust third quarter 2021 financial results.
With me on the call today are James Flynn CEO, Michael Larsen, President James Briggs, CFO and pursue Torres head of real estate investment strategies.
On Tuesday, we filed our 10-Q with the SEC and issued a press release, which provided details on our third quarter results. We also provided a supplemental earnings presentation, which can be found on our website.
Before handing the call over to Jim I would like to remind everyone that certain statements made during the course of this call are not based on historical information and May constitute forward looking statements within the meaning of section 27, a securities that Covid 1933, and section 21 E of Securities Act with 1934.
When used in this conference words, such as outlook evaluate indicate believes will anticipates expects intends and other expressions are intended to identify forward looking statements.
Such forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.
These risks are discussed in the company's reports filed with the SEC, including its reports on form 8-K, 10-Q, and 10-K and in particular the risk factors section of our Form 10-K.
Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by where in the future may be amplified by the Covid pandemic.
It is not possible to predict or identify all such risks.
You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof.
Company undertakes no obligation to update any of these forward looking statements.
Furthermore, certain non-GAAP financial measures will be discussed on this conference call presentation of this information is not intended to be considered in isolation, nor as a substitute to the financial information presented in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at SEC Gov.
With that I will turn the call over to James Flynn. Please go ahead.
Thank you Charlie Good morning, everyone welcome to the Alumina Finance Trust earnings call for the third quarter of 2021.
2021 that's been a very busy year and an important year for them and find a truck.
During the year.
You did several significant capital transactions that allowed us to grow our capital and institutional Investor base.
At the same time, we've made significant incremental investments observed continued strong performance in our portfolio.
And generally positive performance these were all accomplished.
Garment marked with uncertain economic considerations interest rates unemployment asset values are all exacerbated by the impact.
All of such bad was like COVID-19.
And also the political and.
Social unrest, particularly related to COVID-19.
Okay.
Well the lending market continues to be competitive on the breadth of women's black warm and it starts in multifamily in particular continue to provide us with compelling.
And large investment opportunities.
During Q3, we invested over $300 million in new floating rate bridge loans.
Our ability to quickly deploy substantial amounts of recently raised capital.
Our extensive origination capabilities of the manager have driven a strong deal flow deal flow and based on the current pipeline. We expect to be fully deployed ahead of schedule by the end of the by the end of the year.
Okay.
As we continue to grow we also expect to identify other investment opportunities in commercial real estate.
And to invest a portion of our capital.
Investments such as preferred equity Barcelona, another high yield theory instruments.
It's important to acknowledge that our focus on multifamily bridge lending and the strength of our credit and asset management platform.
There's a lot of our portfolio to continue to perform well.
As of the end of the quarter September 30, our loan portfolio. Our portfolio was again, 100% performing no impairments no longer loan defaults and no loan subject to a forbearance.
Similar to previous quarters I'm happy to report, we have still not granted a single forbearance, but more importantly, we've not had the need to grow with a single her bands during the Covid era.
I continue to believe this is a testament to both our rigorous credit standards.
The high quality.
Production and our proactive asset management efforts.
Perhaps most importantly.
Our ability to continue to execute on our business plan.
Collected in the results.
Through September 30 on a year to date basis. Our total distributable earnings has been 28 cents per share which provides support for our dividend.
Well the company did experience a decline in distributable EPS. During Q3 this was anticipated.
As we discussed in previous calls is the successful closing of a preferred equity offering on may 5th.
The recalling of are a priority in the refinance into a billion dollar cielo on June 14th.
We experienced a short term decline in distributable earnings as we deployed the proceeds from those transactions.
We believe this capital deployment impact was transitory in nature, and we do not anticipate any negative impact to our long term earnings outlook on a fully invested basis.
I will speak more about that later, but as discussed our pipeline.
Grown significantly in the deal flow continues to increase.
And glossary.
When the management team took over as the manager L. F. T. In January of 2018, we were clear on our goal of deploying capital into commercial real estate debt investments with a focus in multifamily.
In order to provide stable earnings to support the.
The market returned to our shareholders.
You indicated a desire to grow LLC to a larger scale.
Phil will provide the most value to our shareholders.
This quarter. We've continued we've made progress on those goals and I'm excited for our continued growth as we focus on executing our business plan.
In the coming months, we hope to continue discussions with investors educate market participants about L. T.
And the opportunity that we offer investors, although relatively small in the commercial mortgage space our manager.
Alumina and aluminum platform or not.
One of the nation's largest capital providers in multifamily and seniors housing space executing over 16 billion in transaction volume.
In 2020.
Living services of $49 billion servicing portfolio and employs over 600 employees in 25 more than 25 offices nationwide.
The scale of that platform benefits DLT investors and provides great support for the execution of our investment strategy.
As we continue to show over these last years utilizing the strength of our manager.
To focus our investments in middle market multifamily bridge.
And those have continued to perform well.
With that I'd like to turn the call over to Jim Briggs, who will provide some details on our financial results Jim.
Yeah.
Thank you, Jamie and good morning, everyone.
On Tuesday evening, we filed our quarterly report on Form 10-Q, and provided a supplemental investor presentation on our website, which we will be referencing during our remarks.
The supplemental investor presentation has been uploaded to the webcast as well for your reference on pages five six and seven of the presentation you will find key updates and an earnings summary for the quarter.
The third quarter of 2021 we reported net income to common stockholders of approximately $1 2 million or <unk> <unk> per share.
There were two primary.
Distributable earnings adjustments for the quarter.
First of these was an approximately 150000 noncash hyper amortization of purchase price premiums on two loans acquired into our recent CLO, which prepaid during the quarter and caused the nonrecurring decrease in interest income during the quarter.
The other non distributable item experienced during Q3 was $60000 unrealized loss on mortgage servicing rights, which was driven by higher realized prepayment speeds in our legacy residential MSR portfolio.
I'd like to note that as of quarter end, the carrying value of our legacy MSR asset was less than $700000 and therefore, we do not believe that any future changes in the value of this asset should be a meaningful driver of earnings.
After these adjustments for the third quarter of 2020. One we reported distributable earnings of $1 4 million or <unk> <unk> per share, which represents a decrease relative to Q2, Q2s distributable earnings of $2 8 million or <unk> 11 per share.
As Jim alluded to in his opening remarks. The primary driver of this decline was a cash drag as we work to deploy the proceeds from our recent capital raising transactions.
<unk> continues to exist in the short term for some drag on net income to common stockholders as we complete this capital deployment phase.
Expect this phase to be transitory in nature, and do not anticipate any negative impact to our long term earnings outlook.
I would like to highlight a few additional drivers of the decline in distributable Etfs during Q3 relative to prior quarters.
First of these is related to exit fees unless he's loans are typically structured with exit fees, which are recognized as interest income on the loan pays off and she is collected in cash and therefore, the timing of loan payoffs and associated exit fee income can cause some variability in L. F T's earnings from quarter to quarter.
Q3, <unk> earned exit fees of approximately 800000 on loan payoffs of approximately $118 million.
In the prior quarter L. F T urn to exit fees of $1 4 million on loan payoffs of approximately 176.
Another driver of Q3's performance relative to Q2 was an increase in total expenses from $1 8 million to $2 4 million.
There are a few primary drivers of this increase.
First Q3 was our first full quarter of management fees and expense reimbursements paid on our preferred equity offering which closed on may 1st of this year.
Secondly.
G&A has historically included and continues to include a five basis point servicing expense on our bridge loan portfolio due.
Due to the increase in portfolio size from $611 million as of $630 million to $803 million was up 930, we did experience an uptick there.
Lastly, there is some seasonality to the timing of our recurring professional fee expenses in the prior quarter was a blip below trend.
With respect to our balance sheet, we discussed on last quarter's earnings call that on April 21, the company entered into an amendment to our secured term loan which among other things provides the company with an incremental secured term loan and the aggregate principal amount of seven and a half million and extends the maturity date of our secured term loan to February 2026.
The incremental seven and a half million funded on August 23rd.
And therefore, you will see a corresponding increase to our liability with southern 930 balance sheet.
Our total stockholders equity at September 30 was approximately 169 million, which represents a 55 and a half million dollars increase relative to the year and stockholders equity of approximately 114.
As discussed on prior calls this increase was driven by the execution of our preferred equity offerings during Q2 our.
Common book value per share was $4.37 as of September 30th.
As discussed in prior quarters, I would like to remind everyone that a smaller reporting company as defined by the FCC, we have not yet adopted ASC 2016 desk 13, commonly referred to as Cecil for current expected credit losses, which is a comprehensive GAAP amendment of how to recognize credit losses on financial instruments.
As a smaller reporting company, we are scheduled to implement she sold on January one 2023.
Until then we continue to prepare our financial statements on an incurred loss model basis as of September 30th do not consider any of our loans could be impaired under the incurred loss model and we have not recorded any impairments or allowance for loan losses in the current quarter.
While the current performance of a bridge loan portfolio remains healthy uncertainty about the recovery continues to exist, including its impact on our borrowers and the value of the properties to collateralize, our commercial mortgage loan investments, we will continue to evaluate the loan portfolio for credit losses, and move to record any impairments or allowance as incurred.
With respect to our common dividends in accordance with normal course timing and process.
Not yet made a dividend declaration for the fourth quarter of 2021, we expect to make a determination on our dividend in December after discussing with our board in normal course.
I will now turn the call over to Michael Larsen, who will provide details on our portfolio composition and investment activity.
Thank you Jim and good morning, everyone.
I'll start by touching on recent investment activity. The last several months have been very active for us from an investment standpoint. During Q3, we acquired 15, new investments from our manager with a total U P b and $309 million.
All of these acquisitions were secured by multifamily assets.
These acquisitions had a weighted average spread to LIBOR of 339 basis points on a weighted average LIBOR floor of 16 basis points and weighted average LTV.
75, 7%.
We haven't seen a significant increase in bridge lending opportunities, particularly within the multifamily space, which we expect to continue due to high levels of acquisition activity in the market.
During the quarter, we experienced a $117 million in loan payoffs and at quarter end. Our total loan portfolio had an outstanding principal balance of 100, 800, sorry $803 million.
The portfolio consisted of 53 loans with an average loan size is $15 million, which provides for significant asset diversity.
Our portfolio has a weighted average spread to LIBOR of 346 basis points, 98% of loans in our portfolio have a LIBOR floor above the current spot LIBOR rate with a weighted average floor of 83 basis points.
Due to the general strength in the economic recovery the high level of acquisition activity in the multifamily sector and robust level of CRE CLO issuance competition in the bridge lending space continues to be fierce.
We have seen some stabilization in spreads LIBOR floors have come down significantly over the last year, and we arent seeing pressure on exit fees as well.
Our overall loan portfolio at quarter end was 89% multifamily that does represent an increase from 85% multifamily for Q.
Q2 <unk>.
Hi, it's NASA type concentration is self storage, which represent 7% of our portfolio.
As mentioned on previous calls, we believe that generally self storage and industrial property types to the least volatility in performance outside of multifamily and typically ourselves toward debt investments are related to top national operators.
And they are in market with per capita existing supply.
Historical National average of seven square feet per capita.
The more we focus on moderately leveraged assets as reflected by the weighted average LTV of 61% and our self storage portfolio.
Our exposure to retail and office remained very low as at the end of the quarter and 4% of total <unk> on a combined basis Thats a decline relative to our year end 'twenty level of 9% of total <unk> on a combined basis.
And due to our managers.
<unk> focus in multifamily continue to anticipate that the majority of our loan activity will be related to multifamily assets.
However, we will look to supplement those multifamily investments with strong quality investments in other asset types that can offer strong return profile relative to multifamily.
Yeah.
As of 930, our loan portfolio is financed with one series CLO securitization weighted average spread of about 143 basis points over one month, LIBOR and an advanced rate.
Over 83%. This CLO has a reinvestment period running through December of 2023 that allows principal proceeds and repayments of our.
Loans to be reinvested in qualifying mortgage assets.
We do not currently utilize repo or warehouse.
Refinancing and LST and therefore, we are not subject to margin calls on any of our assets from repo or warehouse lenders.
After quarter end as of November 5th.
<unk> acquired an additional $98 5 million of loans from our manager. These loans have a weighted average interest rate of LIBOR, plus 226 basis points and a weighted average LIBOR floor of 10 basis points.
Year to date, we've made $745 million of new loan investments and we continue to maintain a strong pipeline as we move into next year.
Yeah.
This investment activity has allowed us to deploy a meaningful portion of our remaining CLO capital and we anticipate to fully deploy that feel of capital by year end.
In general market confidence in the economic recovery from Covid positively impacted borrower demand for bridge loans during the year and with these market dynamics and the increase in our pipeline, we feel positive about our investment opportunities to meet he is looking forward.
Now I'll turn the call back to Kim.
Yeah.
Thanks, Mike I appreciate.
The update I appreciate you all joining.
As we've mentioned on the call we've really begun to make progress on our business plan, we're very excited about.
Our ability to raise capital and deploy it quickly.
We look forward to talking to you more about.
Ongoing plans developed T. We look forward to updating you on our progress and we appreciate your time today.
And with that I will turn it over to.
Questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question is from Stephen laws with Raymond James. Please go ahead.
Hi, good morning.
I appreciate good morning, how are you all doing great. Thanks, hopefully you're all doing well.
I appreciate the color.
Paired remarks on the ramp and the color on G&A that was helpful.
Wanted to touch on repay fees you know you gave the contribution on exit exit fees and our net interest income.
How should what kind of repayment expectations do you expect in the coming quarters. So we can kind of make sure. We have the exit fee contribution reflected correctly on the top line.
Yeah. So we have had.
You know obviously in 2021.
In general we've seen you've seen fairly elevated prepayments fees.
In large part driven by.
Evaluation drive business plans are being executed more quickly <unk>, partially and then and that sales are occurring so you.
We do anticipate the.
The fourth quarter.
Having elevated elevating our pay offs are similar to what we've seen in the past couple of quarters, obviously, it will depend on the.
The timing of actual pay offs.
So I think you can use kind of the most recent the most recent quarters as a as a general guide for what we continue to expect obviously the portfolio has grown as well so that's.
Good day.
And then you know the other positive there for the platform generally is as we've we've really seen a tremendous amount of volume coming in on the front end.
And you know in some ways.
Capacity as our capital is or is there a limitation so.
No.
Some ways, we don't love to see payoffs, but it certainly provides us provides us more opportunity to do more business as well.
Yeah.
Great I appreciate the color on that follow up you mentioned looking at some preferred and Mezz investments.
Can you talk about you know a little more detail on that sourcing maybe how much capital youre willing to allocate there and then.
What type of coupons, you're seeing and will you put any leverage.
All of those all of those assets and if so.
Type of leverage are you going to use.
Right. So there's a pretty wide, there's a pretty wide band there in terms of opportunity.
You know we have we have fairly limited capital outside of the CLO today, but we do have we do have some.
And we'd like to use a portion of that too to earn something onto it to you to your question.
Well not a commitment so to speak but I think the idea would be to do so on an unlevered basis.
Structural leveraging the asset itself, whether its a b note of preferred equity or.
A mezz loan.
We have looked at we have looked at opportunities in.
On the limit the sponsor continues to seek out opportunities in the construction lending space.
So that's an opportunity for carving out a b note or a mezz position that could potentially be a an asset there.
That again, it's been focused in multifamily we've looked at self storage, we've looked at some hospitality more because of the opportunity set today as opposed to just.
Just.
A general a general thesis.
On the preferred and Mezz face, we do we do provide preferred or mezz behind Fannie and Freddie loans.
We have looked at it behind other CRE.
Long term fixed fixed investments.
There there is a challenge right if you look at where.
Yoga and where cap rates are.
You know the return profile on those investments as is.
You know not not not really better than a levered first position and in many cases I think I think for some.
Perhaps on the construction side or some of these other.
Structured finance trades, there is an opportunity but.
I do I do see as rates continue to rise.
We'll continue to I think just you know normal course rising as we've seen in the market here.
You'll see a natural.
The increase in that in that band of available capital.
I think when you look at the risk return profile for our preferred and Mezz today, it's a bit of a tough sell.
Les you unless you believe that you don't think cap rates are going to stay extraordinarily low.
For a long period of time so.
Yeah.
If you look at if you look at the market and generally I think you you haven't seen a.
Tremendous amount of need for it right. There's been a lot of equity capital available to sponsors and there's a lot of.
First lien capital available sponsors at reasonably high leverage so.
It's not that we haven't seen any.
We've we've taken a couple of swings at some deals but.
There's just I think the pipeline in general is.
As you.
You know kind of toward the the narrow end of where it would be historically.
I'll ask maybe Brazil, I don't know if you wanted to add anything there, but that would be our.
My high level comments there.
I agree with everything you said Jan but at this point, what I want to emphasize that because of a.
A number of them direct relationships, we have we need we are able to explore and evaluate opportunities that provide some of these off market.
Yeah, and we will continue to focus on coal ash avenues for these types of opportunities.
Great I appreciate the comments from both.
Nice, having the source of stability and flexibility to pursue those when appropriate. Thank you.
The next question is from Steve Delaney with JMP Securities. Please go ahead.
Thanks.
Jim I appreciate the Oh, Jim Briggs I appreciate the detail on the expense items.
I think.
A drop in distributable was certainly expected we were at seven cents against your six or pennies pennies really no big deal. One thing you didn't mention or I Didnt hear it you had existing CLO and then you did the larger $1 billion CLO.
Within that transaction was there any.
Write off of deferred issuance costs related to the prior CLO that was paid off in full I assume theyre, probably was but I didn't hear that in your commentary.
Okay. Thanks, Steve Yes, there was the.
The refinance.
Was last quarter. So the loss on extinguishment of debt that you see in our nine months numbers was the acceleration of those deferred financing costs. So it was.
It was an EPS to distributable rec item for last quarter.
Got it behind us for this quarter and Youll see it in our year to date results and yes, yes, there where it was.
Approximately $1 $7 million.
Yeah, those are big items for sure and Mike Larsen, you know $800 million portfolio.
Absent new capital of any some type what would you say the peak size of the portfolio I guess I'm, saying, how much how much capacity do you have on a net basis to grow that 800 million. Thanks.
Well if you look at the primary source of financing our portfolio today is a $1 billion CLO.
Youre looking at.
$1 billion, a little over $1 billion is based on our current capital base.
Repeat portfolio.
And as we've discussed we think there's real opportunity to grow.
The scalability and.
Continue to consider ways to grow our capital base as we move into next year. So that we can incur.
The increased scale and efficiencies.
Okay.
So you think maybe a couple of quarters to kind of fully utilize the capacity within the CLO.
As mentioned, we expect to fully deploy the CLO before the end of this year.
By the end of the year.
Okay very good.
Yeah.
Jim Flynn.
A lot of effort on the capitalization size.
<unk> recently, obviously with the preferred and the the new Supersized CLO.
I'm just trying to think of next steps I think you're about little over $216 million of total capitalization, we considered the term loan b.
Quasi capital we put it in there in terms of pain from a portfolio perspective, and my question is would it would seem the press is great and that it's there for a long term there's no short term put but 8% as you know expensive money with shorter term unsecured notes you know 456 year.
Notes would would that make sense as a next step in your ability your capitalization.
Goals and trying to grow that base.
Yeah. So so theres a couple a couple of thoughts on that obviously.
From a market standpoint.
The the debt markets in particular have have continued to really look attractive for issuers.
Whether that's the CLO space or the corporate space and you know pretty much since we've done. Our every every I mean, then and this isn't unique to L. T. But every kind of debt capital raise that someone has done over the past probably couple of years over.
Over the passage of time that deal is could've been better right. If you waited but you cant sure.
As we all know so.
You know wood.
Today, it would be it would be great to replace all of our or more expensive capital with that cheaper capital that's available today, they're so so so the answer is yes that would be better there are considerations for if you think about our term loan.
Prepayment penalties and things of that nature, but we are looking at that on a regular basis of.
There is an inflection point, where it makes sense to say hey week, we should be looking at.
Replacing this this.
Source of capital because it's it's accretive to do so even if you have to pay fees.
We're not we're not quite there, but you know okay. If you run the math and look at it we're pretty close to be honest with you.
So that's one thing so clearly.
You're spot on in terms of evaluating what's available in the market and does it make sense to replace your existing capital.
And then as we've talked about on other calls and really since since we took over as manager one of the keys to growing this platform was.
To prove out the business plan to get some new investors into the stock to.
Increase the book value from.
The.
Fifties and sixties to to a point, where you can actually think about raising common equity.
We think we've done that where we look at com and we look at preferred and we look at our overall leverage.
So to.
To my earlier statement about.
Capital being our constraining factor at this point.
Our our path is set on growth and we have.
A tremendous amount of of production and deal flow that can be made available to to this platform into this to <unk> balance sheet and to its shareholders.
And we're working with.
All of our banking teams and advisors on a go.
So at least weekly basis talking about opportunities to okay. We've we.
We did a preferred b increase the term loan we did the CLO. We're gonna be deployed ahead of schedule. So so kind of what's next and you know there is you mentioned one one outlet but there's.
There's many across the capital stack from comment all the way to senior secured and we're kind of evaluating all of it and.
I expect us to continue to be active on a on a go forward basis and thinking about ways to raise more capital.
Right well, it's work you've gotten the stock up to a little bit over 90% of book. So congratulations on that thanks for your comments.
Thanks, Steve.
Next question is from Christopher Nolan with Ladenburg Thalmann. Please go ahead.
Hi, Jim Briggs and the follow up on the loss of excuse me. The extinguishment of debt was three Q item or two Q item I seem to recall that last quarter.
That's correct, Chris It was last quarter.
It was it was recorded at the time, we regained the then existing two existing clo's and closed $1 billion CLO, So last quarter item or it was around $1 $7 million.
Great and I appreciate the detail you gave on them all the expenses I'm just clarification of why was the interest expense.
So much this quarter versus last quarter.
We've got a full quarter of the CLO right. So we refinanced our two existing clo's.
Put on the $1 billion CLO and the associated debt. There. So this was our first full quarter.
The interest expense on the CLO debt.
Okay.
Two 1 billion.
Just to be clear right.
So you raised the preferred you raised the term loan and there is.
1 billion of CLO the CLO.
Yeah, roughly 600 odd million and now your 1 billion. So so this would be the first full quarter with the $1 billion.
I was going to ask.
Scale out of the 800 plus.
Plus of CLO notes.
Okay, just want to make sure there wasn't anything else in there.
And I.
I guess for per seller.
The tech shows that your Ltvs on most of your deal to 72% plus the cash coverage ratio for <unk>.
Many of your borrowers.
So what I can share with respect to our most recent financial statements received from our clients and the weighted average debt service coverage on the portfolio and I'll, let Steve it's about one five times.
So, it's very healthy and as we originate assets.
Generally are very cognizant of the if you will go ahead and get that service college of our assets that are going in and we seek to have a balance obviously from time to time, we do some very strong lease up transactions, which happened over and.
The going in GAAP yield on debt service coverage, but on a portfolio basis are we are certainly cognizant of that in originations.
Great.
Your observation in terms of rent stabilization laws are they proliferating and your markets are pretty common in the larger markets, but I don't know what how they are in the southeast and Midwest.
So to your point the focus of our program.
Historically been demonstrate then it's in the more in middle markets.
Middle market sector and also in the middle of the country kind of thing so.
And not to be.
Generally in the markets, which have more stringent rent stabilization laws, which typically are in the east and west coast, So I'd say that substantial.
Component of our portfolio historically is not impacted by that.
Great. Thank you for the clarification.
Sure.
Again, if you have a question. Please press Star then one the next question is from Matthew Howlett with Nomura. Please go ahead.
Hey, guys. Thanks for taking my question just a.
You talked about the <unk>.
Board meeting on the dividend.
We look at the tissue distribution also running ahead of this quarters earnings but is it just sort of reconcile will get to a run rate number isn't as easy as sort of thing.
Got 40 44 million of cash in the quarter and $148 million.
Restricted cash putting that most of that to work at 4% gets you.
Seven cents per share quarterly increase from yeah, I mean, it's that simple just saying the cash they go to work and I'm.
Curious if you've had its impact and this is our sort of quarterly run rate earnings.
So I.
I think you'd have to you you should look at those two buckets of cash slightly differently right. The 140 of restricted as what's available inside of the CLO.
So when that cash is deployed.
You know I I guess I guess.
Based on what you're saying you're already paying interest so.
Yes that is that is that is a fair statement to you know the.
The ROE of that money is more but the incremental is.
As the ones you put in and the $40 million.
Look real key we want we want to play 100% of our capital even if we were to.
If we were to.
You know put loans on the balance sheet, where the high yield or otherwise.
But I think.
You know, 50% to 60% of that are slightly more I think your assumption is a fair one.
Of the 40.
Got you and he said by the end of the year. So maybe the fourth quarter you don't get the full.
Benefit all of it from from day, one, but is that I guess, where I'm going and this is the board sort of look at the run rate when they when they look at the dividend and they look at the run rate Yeah, I think okay.
Yeah, I mean, we do expect the CLO to be fully deployed and I would expect a reasonable.
I would expect.
Half of that other capital to have been put to work at some point.
You know this quarter early next.
Of the four.
Got you okay great.
Well definitely take that into account and then.
Just.
I don't know if you've spoken about it recently, but can you just give us the update on the merger I know with two years ago Luminaire and Orix thing, it's just starting to give us an update on the manager and how that's going and what does that lefties fit in on longer term plans.
Sure. So in terms of the in terms of the merger.
We're fully integrated the.
The platform the lumen platform the sponsors platform a fully integrated.
There's there's.
No no real silos or parts of the the overall company they've not been integrated.
So all of our all.
All of our lending products investment products that fall under under the aluminum brand are operating.
Yes, seamlessly with singular leadership in.
They're under one brand one.
One set of credit metrics and those types of things so.
That's gone very well.
I think the team did a tremendous job of getting us there, particularly given that we really haven't been back to the office until recently until this quarter.
Since March of 2020, so that was a heavy lift but hap.
Happy and proud to say that that's gone extremely well and it really has been relatively seamless.
And in terms of where you.
How <unk> fits in if if you look at our business model.
As a sponsor and you've got the mortgage banking lending business we've got.
Our servicing book you know fee based businesses were growing our advisory business and investment sales and M&A.
Transaction based fee based businesses and then we have our capital intensive businesses business.
Generally the bridge lending business.
And the high yield.
Consider those considerations are kind of in between or is there still capital intensive but on a on a lower scale than <unk>.
First lien bridge loans.
This is a this is the perfect.
Vehicle for that for that outlet it's got.
This market and <unk> have an investor base that are looking for stable cash flow stable dividend.
Expectation is you do good lending you do good assets you manage your dividend too to the market and you're generally rewarded with.
A better a good investor base and happy investors.
So I think the marrying of those two business models is is really yeah. Perfect is probably an extreme word but they fit very well together right you have you.
Seamless management, you have investor basis, they're kind of choose.
The higher octane kind of evaluation of the of our fee based business and then you have the the.
No.
Fixed income dividend yield.
Investor that is looking at <unk>. So in terms of outfits in I think it is.
Kind of the right vehicle for us to pair with the rest of our platform and we really expect it to continue to grow and be a significant component of our strategy going forward.
That's great I really appreciate the update is that we look forward to that thanks a lot.
This concludes our question and answer session I would like to turn the conference back over to James Flynn for any closing remarks.
Thank you and thanks, all for the questions great call today.
From from the attendees appreciate all that feedback we hope to be in touch with all of you soon.
And look forward to speaking over the during the quarter and on our next investor call. Thanks, all for joining us.
Take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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